Ready to start assessing your suppliers? Well then here’s a quick recap;
At Waasla, we believe in a thorough supplier performance review based on our core values.
- Cost Variables
- Quality Variables
- Service Performance
- Supplier Profiles
- Risk Variables
Let’s say the performance variables mentioned above have been set in stone. However they cover the bigger picture, hence we need to dig deeper.
Performance management involves the setup and continuous tracking of
operational measures. It focuses on the “critical few” measures, which are consolidated on a single supplier scorecard and relevant for the business.
These performance variables can be further split into sub-variables. So let’s go one by one.
Number 1: Cost Variables
We should start with the Cost as that speaks volumes to everyone. The core element that oftentimes rules one supplier over another is the price of their product. We all love a bargain, so the cheaper the better. But not always! Therefore the product price is one of the key factors a supplier will stand out.
Secondly, we have to assess their total logistics management cost which includes a whole range of costs associated with logistics, including transport and warehousing, inventory carrying, administration, and order processing. Lastly, consider what additional tariffs and taxes will be applied to the supplied products locally and internationally.
Number 2: Quality Variables
A $ 500 notebook Vs A $ 50 notebook? Which one would you pick? Does the higher price tag mean it will be a class apart from the rest?
NO!
Product quality is essential in determining whether the purchase should be made or not. Everything in a batch should be great and all equal, so calculating the percentage of defective items is crucial because getting 9/10 great products is better than 2/10 excellent ones. Suppliers should also be reliable and consistent in their orders.
Number 3: Service Performance
Service performance could make up a big chunk of your overall score and is reflective of your shipment planning and chosen supplier. A high-quality supplier will ensure your deliveries are on time and met with all delivery compliance standards with great performance. Note down the suppliers lead time because the shorter the better, with a stable delivery of goods.
Let us not forget that COMMUNICATION IS KEY! Suppliers' timely response and ease of communication helps both your company and the supplier to ensure all information is passed along and everyone is onboard with updates, especially in case of any disruptions.
Number 4: Supplier Profiles
Assessing a supplier’s previous experience and past performance with the product/service to be purchased is an important factor in establishing whether goods should be bought from them or not. This also means they have to conform to a relative level of sophistication of the quality system, including meeting regulatory requirements or possess the ability to meet current and potential capacity requirements on the desired delivery schedule. Financially stable suppliers tend to deliver on time and in full, therefore always peek at their financial stability.
Next, we must view their geographical location. As you have seen this year’s coronavirus crisis which has been disastrous, to say the least, importing from external suppliers was halted by many countries immediately. Hence always consider their locality because that correlates to their delivery time.
You will also have to look at their technical capability, support, and availability. Especially their support in developing and optimizing processes for the benefit of your company. Ask yourself “Are they trying to build a good supplier relationship, or sell their product?”
Number 5: Risk Variables
Lastly, let’s dive into the supplier's risk factors. A supplier should notify you of any external risks involved prior to any purchase to keep things transparent. These could include environmental factors such as natural disasters. You also have to be up to date with current exchange rates and the economic and political position of all suppliers and the countries they are from to ensure there are no barriers coming in between the supply and the demand. However, you as a buyer are obliged to show leniency in issues where the supplier's hands are tied and that can only be done through constant communication and record-keeping.
Building a good supplier assessment metric will ensure all suppliers are treated fairly without judgment or bias. By assessing your suppliers with quantitative measures, you’ll see what improvement can be done on your suppliers’ side, and address them accordingly to improve overall supply chain performance at your company.
